Sometimes the greatest research opportunities are just cast into your lap. Take for instance this very interesting study I did of supermarkets. I was asked by prof. Laurens Sloot of Groningen University and EFMI Business School to speak about High Performance Organizations during a conference for supermarket franchisers. I suggested we could collect some HPO data beforehand from these franchisers and do some statistical work, and present the results during the conference. Laurens agreed and asked Erjen van Nierop for the statistical work and in short order we had a “dream team” for the study. And this study yielded some pretty interesting and sometimes startling results!
The Dutch supermarket industry is dominated by a small number of powerful companies which capture the majority of sales and which compete fiercely with each other. This competition is mainly quality based, in the sense of offering increasingly more products of higher quality and striving for better distribution mechanisms. Interestingly there does not seem to be much attention for the quality of the internal supermarket organisation, i.e. quality of people, internal processes, and performance reporting. So we decided to evaluate the strength and quality of the supermarkets and their managers using the HPO Questionnaire, putting in some extra questions on time spend and strategic focus of the managers. This questionnaire we send to 400 supermarket franchisers (independent business owners who run supermarkets on behalf of the big supermarket formulas) and we received 122 completed ones back which we duly analyzed.
On average the participating supermarkets were well-performing although they could not yet be classified as high performing according to the HPO Framework (see Figure 1).
Figure 1: The HPO scores for the supermarket franchisers
When looking in more detail at the HPO scores, it turns out that 12 per cent of the participating supermarkets saw themselves as being an HPO, with another 16 per cent scoring between 8.0 and 8.4 meaning that they were close to becoming an HPO. At the same time, 68 per cent of the participating supermarkets indicated that they performed on a satisfactory level (between 6.0 and 7.9) while 3 per cent performed unsatisfactory (o6.0). The large number of satisfactory performing supermarkets might be explained from the fact that in the current competitive climate of the supermarket industry all supermarkets that still exist do from necessity perform at least on that satisfactory level.
There was also a clear, small number of “winners” that indicated they have a strong internal organisation. These supermarkets with the highest HPO scores indeed achieved better financial results (both in terms of revenue and margin achieved) than those of supermarkets with lower HPO scores, just as the HPO definition states (see Figure 2). We divided the supermarkets in categories based on their HPO score, and we matched these with categories based on the scores for achieved revenue and margin (1 = I belong to the badly performing supermarkets these past few years; 2 = I belong to the mediocre performers, 3 = I belong to the average performers, 4 = I belong to the fairly successful performers, 5 = I belong to the best performers).
Figure 2: The relation between HPO score and supermarket and margin scores
The franchisers were also presented with several statements on factors which potentially determined the success of their supermarket. Five of these referred to the emphasis franchisers put on their management efforts to increase performance, and four looked at the emphasis franchisers put on the tasks they mainly perform day-to-day. The respondents had to indicate the degree to which they agreed with the statement, on a scale ranging from 1 (very much disagree) to 7 (very much agree). Their scores were correlated with their HPO scores to see which factors had a significant influence. Interestingly we found that the overall HPO score was most strongly related to the focus of the franchise supermarket on obtaining the highest possible revenue, this showed that HPO supermarkets tend to be sales driven. Furthermore, we found a significant correlation between the HPO score of the supermarket and the focus of the franchise supermarket on obtaining a high level of employee satisfaction, indicating that high HPO scores might go hand in hand with satisfied employees. No or low correlations were found between HPO score and cost focus and HPO score and margin focus.
When we analyzed the relation between HPO score and the way franchisers allocate their time among several management tasks, we found interesting effects. First of all there was quite a strong negative relation between HPO score and the percentage of time that the franchisers allocate to operational management tasks (quality control, control of logistics), while we found a positive relation between the HPO score and the time allocated to financial management, HRM and commercial management. This indicated that franchisers with too much focus on the daily operation (operational management) at the expense of other important management tasks (e.g. HRM, financial management and commercial management) did not easily rank among the best performing organizations. It was probably therefore more about the franchisers finding the right balance between their tasks. And, although this was not the aim of the study, I was happy to find that the supermarket I frequent for my weekly shopping ranked among the highest performing supermarkets. So nowadays the people working there wonder who this guy is walking around their supermarket with the biggest grin ever on his face!
André de Waal, Erjen van Nierop and Laurens Sloot (2017), “Analysing supermarket performance with the high-performance organisation framework”, International Journal of Retail & Distribution Management, Vol. 45, Issue 1, pp. 57-70